It appears that Russia and its rapidly mounting economic quagmire will not be alone in its struggle, following an announcement that China has offered its support to President Vladimir Putin in the form of currency swap assistance.
The past few weeks have led to an outright capitulation of the ruble (RUB) as well as widespread concerns of economic pandemonium in the face of a currency in flux – this in turn has led to the suspension of the RUB on a number of FX platforms.
While President Putin has ‘reassured’ market participants that the Russian economy will effectively rebound in two years time, many individuals and economists have taken a more pragmatic approach, cautioning against a depletion of FX reserves in a bid to bolster the ruble.
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Indeed, Russia faces a litany of headwinds, including the accumulation of sanctions and the recent collapse in oil prices that still shows no signs of bottoming out.
As a result, China has offered its help to Russia in hopes of allaying any further damages to the Russian economy, whilst establishing a modicum of stability to the ruble itself. Over the weekend, Chinese Foreign Minister Wang Yi offered the country’s support in the form of an expansion of a broad-based currency swap between the two countries, utilizing the yuan for bilateral trade in a greater capacity.
It remains to be seen whether any sort of arrangement can be worked out between Russia and China, though proponents of a stable ruble are no doubt eyeing this announcement as it develops. In the meantime, market participants will likely have to adapt to a volatile ruble.